Corporate governance involves balancing the interests of a company's stakeholders through rules, practices, and processes that direct and control the company. It provides the structure for setting objectives, monitoring performance, and determining how to attain objectives. The OECD defines it as the set of relationships between management, the board of directors, shareholders, and other stakeholders. India's corporate governance framework is outlined in the Companies Act 2013, SEBI guidelines, listing agreements, accounting standards, and secretarial standards. The Companies Act 2013 and Clause 49 of listing agreements emphasize the role of boards and board processes to strengthen corporate governance for listed companies. They require minimum numbers of independent directors, audit committees, and periodic disclosures for transparency.

1. What is Corporate Governance?
ͱ Corporate governance is the system of rules,practices and processes by which a company is directed and
controlled.
ͱ Corporate governance essentially involves balancingtheinterests of a company's many stakeholders,such
as shareholders, management, customers, suppliers, financiers, government and the community.
The Organisation for Economic Cooperation and Development (OECD), which, in 1999, published its Principles of
Corporate Governance gives a very comprehensive definition of corporate governance, as under:
"a set of relationships between a company's management, its board, its shareholders and other
stakeholders. Corporate governance also provides the structure through which the objectives of the
company are set, and the means of attaining those objectives and monitoring performance are
determined. Good corporate governance should provide proper incentives for the board and
management to pursue objectives that are in the interests of the company and shareholders, and should
facilitate effective monitoring; thereby encouraging firms to use recourses more efficiently."
Regulatory framework on corporate governance
The Indian statutory framework has, by and large, been in consonance with the international best practices of
corporate governance. Broadly speaking, the corporate governance mechanism for companies in India is
enumerated in the following enactments/ regulations/ guidelines/ listing agreement:
1. The Companies Act, 2013 inter alia contains provisions relating to board constitution, board meetings, board
processes, independent directors, general meetings, audit committees, related party transactions, disclosure
requirements in financial statements, etc.
2. Securities and Exchange Board of India (SEBI) Guidelines: SEBI is a regulatory authority having jurisdiction over
listed companies and which issues regulations,rules and guidelinesto companies to ensure protection of investors.
3. Standard Listing Agreement of Stock Exchanges: For companies whose shares arelisted on the stock exchanges.
4. Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI): ICAI is an autonomous
body, which issues accounting standards providing guidelines for disclosures of financial information.
5. Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI): ICSI is an autonomous
body, which issues secretarial standards in terms of the provisions of the New Companies Act.
Key legal framework for corporate governance in India
The Companies Act, 2013
The Government of India has recently notified Companies Act, 2013 ("New Companies Act"), which replaces the
erstwhile Companies Act, 1956. The New Act has greater emphasis on corporate governance through the board
and board processes.
Listing agreement – Applicable to the listed companies
SEBI has amended the Listing Agreement with effect from October 1, 2014 to align it with New Companies Act.
Clause 49 of the Listing Agreement can be said to be a bold initiative towards strengthening corporate governance
amongst the listed companies. This Clause intends to put a check over the activities of companies in order to save
the interest of the shareholders. Broadly, cl 49 provides for the following:
1. Board of Directors
The Board of Directors shall comprise of such number of minimum independent directors, as prescribed. In case
where the Chairman of the Board is a non-executive director, at least one-third of the Board shall comprise of
independent directors and where the Chairman of the Board is an executive director, at least half of the Board
shall comprise of independent directors. A relative of a promoter or an executive director shall not be regarded as
an independent director.

2. 2. Audit Committee
The Audit Committee to be set up shall comprise of minimum three directors as members, two-thirds of which
shall be independent.
3. Disclosure Requirements
Periodical disclosures relating to the financial and commercial transactions, remuneration of directors, etc, to
ensure transparency.
4. CEO/ CFO Certification
To certify to the Board that they have reviewed the financial statements and the same are fair and in compliance
with the laws/ regulations and accept responsibility for internal control systems.
5. Report and Compliance
A separatesection in the annual report on compliance with Corporate Governance, quarterly compliance report to
stock exchange signed by the compliance officer or CEO, company to disclose compliance with non-mandatory
requirements in annual reports.